PSMA rejects controversial tax concessions to CSCECL

--Tax exemptions to cost national exchequer Rs 11bn

KARACHI: The SRO issued to benefit the import material of China State Construction Engineering Corporation Limited (CSCECL) has been criticised by a number of people all over the country including Pakistan Steel Melters Association (PSMA) and top politicians.

The Federal Board of Revenue (FBR) had issued a notification saying, “…is pleased to exempt from whole of the sales tax and federal excise duty on the imported construction materials and goods imported by M/s China State Construction Engineering Corporation Ltd (M/s CSCECL), whether or not locally manufactured, for construction of Karachi-Peshawar Motorway (Sukkur-Multan Section) subject to fulfillment of same conditions, limitation and restrictions as are specified under Notification No S.R.O 642(1) 2016, dated July 27, 2016, provided that total incidence of exemptions of all duties and taxes in respect of construction materials and goods imported for the project shall not exceed ten thousand eight hundred nininety-eightillion rupee.”

To record its reservations at the highest level, PSMA has drawn the attention of Prime Minister (PM) Shahid Khaqan Abbasi towards this issue through a letter requesting the PM to withdraw the disputed exemptions allowed to the foreign company on the expense of local steel sector.

The association has strongly rejected the recently issued SRO 47(I) 2018, that allows controversial duty and tax exemptions to CSCECL. These exemptions to the Chinese company will cost the national exchequer approximately Rs11 billion.

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Under this controversial SRO, CSCECL which is working on Sukkar to Multan motorway section has been allowed duty-free import of construction materials and machinery in Pakistan.

In 2017, Pakistan Steel Melting Industry was coined as the fastest growing steel industry in the world. PSMA Senior Vice Chairman Hussain Agha notes, “The steel industry of Pakistan is gearing up for a massive $300 million capacity expansion within the next 24 months, which would yield multifold growth in revenue collection to the national exchequer. The Chinese are our brothers in progress and we warmly welcome China-Pakistan Economic Corridor (CPEC), however, we must ensure that it is done on a fair and mutually beneficial basis. Tremendous jobs are at stake if the government gives anti-localisation incentives to special companies.”

Steel Industry of Pakistan generates the largest revenue amongst the growing industrial sector of Pakistan and also aims to fulfil the upcoming demand of CPEC through providing high grade manufactured steel.

Agha Steel Industries Executive Director Hussain Agha said that the “First phase of Agha Steels project is expected to come online in 2018, which will directly save the government at least $180 million per annum in direct import substitution and will further generate additional taxes.”

New steel projects expected to come online within the next 12 months will save the national exchequer billions of dollars by import substitution. PSMA strongly objects to any policy that can hamper growth in Pakistan and SRO 47(I) 2018 will dampen future investments and will cause Rs11 billion loss to the government in revenue collection.

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Arshad Hussain
The author is business reporter at Pakistan Today. He can be reached at [email protected] He tweets @ArshadH47736937
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